The strangest of political bedfellows

In Washington, nearly every political fight is the same. Democrats and their allies tend to take one side, while Republicans and their allies tend to take the other. Dems will seek a compromise, Republicans will reject the very idea of compromise, and the result is usually the same.

But once in a great while, an issue shakes the snow globe and new teams take shape.

For example, imagine a fight in which the White House, the Chamber of Commerce, House Democrats, and business lobbyists are on one side, while Tea Partiers, Sen. Bernie Sanders, and the billionaire Koch brothers’ political operation are on the other.

That’s exactly what’s happened in the debate over something called the Export-Import Bank, which Congress will need to reauthorize by the end of September if it’s to continue to exist. The entity, also called the Ex-Im Bank, has been around for 80 years, extending loans to foreign entities so they can more easily buy American products.

Congressional support for the Bank has always been one-sided – critics have never come close to defeating it and votes have been lopsided, when they’ve been held at all (the Bank has routinely been reauthoritized by unanimous consent) – but things are different this year.

Hundreds of businesses representing everything from the fashion industry to petroleum companies are urging Congress to extend the Export-Import Bank’s charter.

In a letter addressed to all House lawmakers, the businesses say they’ll lose out to competitors if the charter is not extended, costing the U.S. economy jobs just more than a month before the midterm elections.

The American Petroleum Institute, American Apparel & Footwear Association and the National Small Business Association are just some of the hundreds of groups who signed the letter, first obtained by The Hill. The letter says that if Ex-Im isn’t reauthorized, the U.S. would lose out to international competitors.

This sounds like a group of industries that Republicans would be eager to please. Indeed, I believe the GOP line is to call them “job creators” and give these folks just about anything they want.

But in a curious twist, it’s the White House siding with the business groups and Republicans moving in the opposite direction.

The debate took on new urgency over the weekend when incoming House Majority Leader Kevin McCarthy (R-Calif.), who supported the Ex-Im Bank as recently as 2012, announced on Fox News that he now wants to eliminate the Bank. This puts McCarthy in the unusual position of opposing the policy he recently supported and rejecting the position of his mentor, outgoing House Majority Leader Eric Cantor (R-Va.).

So what in the world is going on?

There are experts who can speak to this with greater authority than I can, but from a distance, the debate effectively looks like this: for Bank proponents, these loans are a necessary way to improve U.S. exports abroad. Most of our international economic rivals have similar entities, so if our Ex-Im Bank is scrapped, American businesses may find themselves at a competitive disadvantage. What’s more, the Export-Import Bank doesn’t actually cost taxpayers anything, since it’s financed through fees and interest.

For Bank opponents, this entity offers little more than “corporate welfare,” which draws critics from both sides of the ideological spectrum (a senator by the name of Barack Obama once criticized it during his tenure on the Hill, though he, too, later changed his mind). Worse, they argue, the institution itself appears corrupt, allegations that coincide with new reports like these.

The U.S. Export-Import Bank has suspended or removed four officials in recent months amid investigations into allegations of gifts and kickbacks, as well as attempts to steer federal contracts to favored companies, several people familiar with the matter said.

One employee, Johnny Gutierrez, an official in the short-term trade finance division, allegedly accepted cash payments in exchange for trying to help a Florida company obtain U.S. government financing to export construction equipment to Latin America, according to a person familiar with the inquiry. Mr. Gutierrez was escorted from the Ex-Im Bank building in April, said two people familiar with the matter.

What would happen if the Bank were to disappear for the first time since the Great Depression? No one seems to know for sure, but for supporters, it’s not worth the risk in a delicate economic environment. For opponents, no matter what, it’s wrong for the government – or groups operating with a government charter – to “pick winners and losers” while intervening in the free market.

The policy debate will continue to unfold in the coming weeks, posing an interesting challenge for House Republicans torn between siding with Big Business and siding with Tea Partiers. But in the meantime, the political angle I’m still kicking around is McCarthy’s switch. What made the incoming Majority Leader flip-flop? Why would he break with Cantor and his corporate allies on this?

I talked to a source close to the debate last night who noted that House Financial Services Committee Chairman Jeb Hensarling (R-Texas) is a fierce Ex-Im Bank critic, so much so that he wouldn’t even hold a committee hearing to explore the pros and cons of its future*. Hensarling has also made no secret of the fact that he’s considering a run for a top leadership post – Speaker or Majority Leader – after the midterm elections.

Hensarling has been at odds with Cantor – the outgoing Majority Leader cut the Texan out of multiple policy debates, seeing him as needlessly obstructionist – and it appears that McCarthy wants Hensarling to be an ally, not an opponent.

In other words, the incoming Majority Leader is prepared to let the Export-Import Bank die because he sees it as a way to keep his right flank happy – and as a way to keep his leadership post past November.

* Update: I spoke to a House Financial Services Committee aide this afternoon who informed the panel will hold a hearing on the policy tomorrow. It follows a subcommittee hearing held last year.